GCC EQUITY

Saudi Tadawul Group Holding Company debuted on the Saudi exchange in November, marking a new era in the country’s financial markets.

Trading under the symbol 1111, the Saudi Tadawul Group (STG) floated 36 million shares, representing 30% of its issued share capital.
Institutional investors were allocated 70% of the shares, while the rest were earmarked for individual investors.

The IPO saw significant demand from institutional and retail investors, and was 121x and 4.4x oversubscribed, generating SAR 458 billion and SAR 5.02 billion, respectively. The offering shares were priced at SAR 105 per share, at the top of the company’s initial price range, implying a market capitalisation of SAR 12.6 billion at the time of listing.

The listing comes after the company restructured earlier in the year with the launch of the holding company, the Saudi Tadawul Group – a central pillar of the Financial Sector Development Program, under the Vision 2030 initiative.
 
“The Saudi Tadawul Group is the new capital of ambitions,” said Sarah Al-Suhaimi, Saudi Tadawul Group chair.

The STG will operate four subsidiaries: the Saudi Exchange, a dedicated stock exchange business (previously known as the Saudi Stock Exchange Company - Tadawul), the Securities Clearing Center Company (Muqassa), the Securities Depository Center Company (Edaa), and Wamid – a new innovative applied technology services business.

"This is a significant achievement in our journey to transform Saudi Arabia's economy. Comprehensive capital market reforms are not only prudent but essential to ensuring higher economic growth, to achieving the nationwide goal of the successful delivery of Saudi's Vision 2030, and to align with the strategy of the Public Investment Fund (PIF),” Al-Suhaimi said.

IPO BOOM

The landmark IPO is the latest in a slew of new listings on the Tadawul this year. According to STG data, 12 companies debuted on the Saudi exchange in 2021, including the International Company for Water and Power Projects (ACWA Power), Arabian Contracting Services Co., and Arabian Internet and Communications Services Co.

Three other company listings are in the pipeline, according to Tadawul.

In October, the Saudi exchange was included in FTSE Russel’s Emerging Markets Government Bond Index (EMGBI) effective April 2022.

“The inclusion of Saudi Arabia in the FTSE EMGBI marks the first time Saudi riyal-denominated fixed income instruments are included in a global index and is a significant milestone in the development of the broader Saudi capital market,” the company said. “The FTSE EMGBI measures the performance of local currency government bonds from over 16 countries, providing a broad benchmark for global portfolio managers to enable performance comparisons across sovereign debt markets.”
 

Like most global equity markets, the Tadawul index has also enjoyed strong growth in 2021. The market was up 23.8% by the end of November, which included 10 consecutive monthly gains.

The market briefly surged past SAR 10 trillion this year, before closing at SAR 9.6 trillion by the end of December.

The Saudi market, which was one of two GCC indices that were in positive territory in 2020, continued its rally this year on the back of several initiatives related to Vision 2030.

Investors were also buoyed by high oil prices, which have surged 47.7% this year to USD 74.20 per barrel, as the global economy rebounds.

As many as 17 of Tadawul’s 21 sectors are in positive territory for the year, highlighting the broad recovery. Not surprisingly, software and services – which has thrived globally during the pandemic – emerged as the best performing sector with gains of 96.1% until November.

Media rose 87.2%, followed by banks (up 50.5%), and diversified financials (+40.6%).
          

REGIONAL OUTLOOK

The broader S&P GCC index has also galloped ahead, rising 29.84% year to date, as most Gulf countries leveraged their strong fiscal standing to support the economy, and took measures to stem the tide of COVID-19.

A number of countries embarked on stimulus programmes, while corporations took the opportunity to cut costs and streamline their operations to prepare for the post-COVID era, leading to greater business activity and higher earnings potential for listed companies.

The Abu Dhabi General Index has emerged as the best performing market year to date, with gains of 69.4%. Dubai index (up 23.3%), Kuwait’s Premier Market Index (up 21.4), and Bahrain All Share Index (up 16.1%) also saw gains. Oman’s MSM 30 Index has grown 9.3% year to date, with Qatar’s QE20 Index posting the slowest growth among GCC markets, with 9.1%.